Homeowners Cash in on Equity in Droves

Homeowners may be reluctant to sell, but they still want to see a piece of that equity in their homes now. They’re cashing out in levels that have not been seen since the financial crisis. Nearly half of borrowers who refinanced their homes during the first quarter did a cash-out option, the highest level since the fourth quarter of 2008, according to Freddie Mac.

While the number of cash-out refis grows, Len Kiefer, Freddie Mac’s deputy chief economist, does not see this as playing out similarly to the run-up to the financial crisis when borrowers were using their homes like ATMs. Borrowers must follower stricter underwriting standards now when they refinance a mortgage or get a loan. Also, there is less money at stake than a decade ago, Kiefer notes.

Source: “Homeowners Are Again Pocketing Cash as They Refinance Properties,” The Wall Street Journal (May 27, 2017)

Renters Admit They Favor Home Ownership

Seventy-two percent of renters “prefer” or “strongly prefer” to own a home rather than rent one, according to the latest SCE Housing Survey conducted by the Federal Reserve Bank of New York.

Nearly 56 percent of renters view homeownership as a “good investment,” the survey finds.

The majority of renters favor homeownership, despite expressing concerns about their ability to one day afford a home. However, they do believe it’s getting easier to qualify for a mortgage. Sixty-five percent of renters say qualifying for a mortgage is “somewhat difficult” or “very difficult,” but that is gradually declining. Twenty percent of renters view qualifying for a mortgage as “somewhat easy” or “very easy,” which is up from 15 percent in 2015.

Source: “Home Price Growth Expectations to Increase: Renters Perceive Easier Access to Mortgage Credit,” Federal Reserve Bank of New York (May 11, 2017)

Foreclosures Plunge to Lowest Level Since 2005

Foreclosure filings—which include default notices, scheduled auctions, and bank repossessions—are down 23 percent from a year ago and have hit their lowest level since November 2005, according to the April 2017 U.S. Foreclosure Market report, released Thursday by ATTOM Data Solutions.

A total of 34,085 properties started the foreclosure process in April, well below the pre-recession average of more than 77,000 foreclosure starts per month between April 2005 and November 2007, according to the report.

More details at ATTOM Data Solutions and source: RealtyTrac

The Housing Market Is Outperforming Forecast

The housing market has been off to a roar this spring. In fact, the market is performing so strongly that the National Association of REALTORS® has upgraded its forecast for the year.

At the start of the year, home sales were expected to match last year’s pace due to higher mortgage rates and diminishing affordability. But the market is hardly slowing down, notes Lawrence Yun, NAR’s chief economist. He now predicts existing-home sales to rise by 3.5 percent, and home prices likely will increase 5 percent this year.

“With no imminent threat of a recession, the housing market’s strong first quarter sets the foundation for continued gains the rest of the year,” Yun writes.

Source: “First Quarter GDP May Be Cool, But Housing Market Downright Balmy,” The Hill (May 1, 2017)

Poll: More Expect Home Prices to Keep Rising

Sixty-one percent of U.S. adults believe home prices in their local area will rise over the next 12 months, the highest percentage since Gallup began collecting such data in 2005. Marking a difference between 2008 and 2012, when one-third of Americans believed home prices would increase.

Residents in the western region of the U.S. are the most optimistic, with nearly three-quarters of residents saying they expect price increases compared to slightly more than half of Midwestern and Eastern residents, according to the Gallup poll. With mortgage rates sitting below 4 percent, consumers may have more incentive to act now before home prices rise even more.

Sixty-seven percent of U.S. adults say now is a good time to purchase a home, which is down slightly from the 2012-to-2014 period when at least 70 percent said so. Unsurprisingly, homeowners (74 percent) are more likely than renters (56 percent) to say it’s a good time to purchase a home, according to the poll. Higher home prices and declining views of homeownership may be behind the dip in those who say it’s a good time to buy, Gallup researchers note.

Source: “More in U.S. Expect Local Home Values to Rise,” Gallup.com (April 24, 2017)

More Homeowners Tackle Renovation Projects

Homeowners are sprucing up their properties and undertaking more remodeling and repair projects, according to a recent study.

The Leading Indicator of Remodeling Activity, released by the Joint Center for Housing Studies at Harvard University, shows an annual growth in home improvement and repair expenditure this year that will remain above its long-term trend of 5 percent. Index authors, however, foresee a steady decline from 7.3 percent in the first quarter to 6.1 percent by the first quarter of 2018.

The National Association of Home Builders’ Remodeling Market Index also showed an increase in the first quarter of 2017, marking the highest reading in activity since 2015. The NAHB’s index shows that more remodelers are reporting that activity is higher now compared to the prior quarter. “A milder than usual winter has led to increased remodeling activity and a positive outlook for spring,” says Dan Bawden, the chairman of NAHB Remodelers. “Remodelers are seeing stronger market conditions with customers more willing to spend money on both small and large projects.”

—Melissa Dittmann Tracey, REALTOR® Magazine

Survey: Outdoor Kitchens Making a Comeback

A few years ago, outdoor kitchens were considered a hot amenity. In a December 2015 survey by the National Home Builders Association, builders indicated that outdoor kitchens would be one of the least likely features to be added to new single-family homes in 2016. But now, architects say homeowners and prospective buyers are showing resurgent demand for outdoor cooking spaces, according to the American Institute of Architects’ most recent Home Design Trends Survey.

“Homeowners continue to find ways to add value to their homes by creating more functional space, which is apparent in the rise in popularity of outdoor kitchens,” says Kermit Baker, chief economist of the AIA. “Kitchens have become a hub for the home. Now homeowners want to bring some of that activity to their outside space.”

Many buyers will even pay a premium for outdoor kitchens, according to a realtor.com® survey last year. Researchers found that buyers were willing to pay up to 26 percent more for a home with an outdoor kitchen compared to a similar home without one in the same ZIP code.

When it comes to indoor kitchens, homeowners continue to eye certain upgrades, with the most desired being a charging station or computer area, a double island, high-end appliances, and sensory faucets, according to AIA.

Source: “Outdoor Kitchens: Still on the Way Out?” RISMedia (April 15, 2017) and “Are Outdoor Kitchens on the Outs?” RISMedia (March 17, 2016)

Owners Question Appraised Values: Too Low?

Homeowners say their homes are worth more than what appraisers say they’re worth, and the gap between the values is growing, according to Quicken Loans’ latest Home Price Perception Index.

Appraisals, on average, were 1.77 percent lower than what homeowners expected, according to the index. This marks the fourth consecutive month in which the gap between homeowner estimates and appraiser opinions has widened.

That said, appraisals are showing higher values than what homeowners expected in some of the hottest housing markets, mainly on the West Coast, according to the index reading for March.

Source: Quicken Loans

Home Prices Blamed for Student Loan Defaults

The housing crisis may also have sparked the increase in student loan default rates, according to a working paper by the National Bureau of Economic Research.

The study says the drop in home prices during the Great Recession also coincided with a 24 to 32 percent rise in student loan default rates. Researchers looked at administrative student loan data along with ZIP code home price data for about 300,000 student loan borrowers in repayment.

Last year, more than 1 million federal student loan borrowers defaulted on their debt.

“The huge rise in student loan defaults is on everybody’s minds and the question is what’s the cause of this rise?” says Holger Mueller, one of the authors of the paper and a professor of finance at New York University’s Stern School of Business. “What we want to do is point to another very important source of default risk and that’s just the labor market.”

Source: “Why Lower Prices Lead to Higher Student Loan Default Rates,” MarketWatch (April 1, 2017)

Hispanics Are a Growing Home Buying Force

While the national homeownership rate decreases, ownership rates among Hispanics are defying the trend with steady rises.

The Hispanic homeownership rate grew to 46 percent last year, topping previous highs of 45.6 percent in 2015 and 45.4 percent in 2014, according to the National Association of Hispanic Real Estate Professionals’ 2016 State of Hispanic Homeownership Report.

More than 7.3 million Hispanic households owned their homes in 2016, 330,000 of which were from new households formed in 2016. That comprises 38 percent of all households formed, according to the report.

“The significance of a strong desire for homeownership cannot be overstated,” the report notes.

More information at: “Hispanic Homeownership Rate Rises for Second Straight Year,” RISMedia (March 28, 2017)